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Medicaid Program Evaluation 

Working Paper 


MPE 1.13 

June 1988 




Brian 0. Burwell 
SysteMetrics /McGraw-Hill 


Department of Health and Human Services 

Health Care Financing Administration 

Office of Research and Demonstrations 

This Working Paper is considered an internal document and is not intended to be 
an official publication. The material presented has not been cleared for publication 
and should not be quoted without permission of the author(s). The views expressed 
are solely those of the author(s) and do not necessarily represent the position of or 
an endorsement by the Health Care Financing Administration. 

Department of Health and Human Services 
Health Care Financing Administration 
Office of Research and Demonstrations 

Medicaid Program Evaluation 
Working Paper 

MPE 1.13 June 1988 




Brian 0. Burwell 

24 Hartwell Ave. 

Lexington, MA 02173 

(617) 862-1020 

Project Officer 

Harry Savitt, Ph.D. 

Health Care Financing Administration 

Office of Research 

This Working Paper was prepared by SysteMetrics/McGraw-Hill as a sub-contractor 
to La Jolla Management Corporation under HCFA Contract No. 500-83-0056. The 
Project Director is Mr. Robert Clinkscale, President, La Jolla Management 
Corporation, Columbia, MD. The statements contained in this report are solely 
those of the author and do not necessarily reflect the views or policies of the 
Health Care Financing Administration. The author assumes responsibility for 
the accuracy of the information contained in this report. 


The author would like to express special thanks to Mr. Sandy Adkins of the 
Maryland Developmental Disabilities Administration, Coordinator of the Medicaid 
Waiver Program for the Developmentally Disabled, for his cooperation and 
assistance during the conduct of this study. 


Chapter 1. INTRODUCTION 1 

Background 1 

The Maryland Medicaid Waiver: A Program Description 2 

Client Eligibility 3 

Quality Assurance Mechanisms 7 

Purpose and Organization of Report 7 



How important a factor was the Medicaid waiver program in the 

shift toward community-based services in Maryland? 10 

What impact has this expansion in community-based services had 

on the supply of community-based residential providers? 12 

Has the growth of the waiver program met original projections? 13 

What are the characteristics of persons served under the 

Medicaid waiver program in Maryland compared to waiver 

recipients in other States? 17 

What impact has the DD waiver had on ICF-MR utilization and 

expenditures in Maryland? 19 

How do Medicaid and total Federal costs under the waiver 

compare to the costs of ICF-MR care? 24 

What impact has the DD waiver had on aggregate Medicaid spending 

for the developmentally disabled in Maryland? 28 


What stresses have been placed on the community-based service 

system as a result of the DD waiver program? 30 

How are staffing problems affecting the quality of Medicaid 

waiver services? 33 

To what extent are resources available to assist providers in 

serving clients with behavioral and/or medical needs? 36 

How effective are the quality assurance mechanisms employed 

in the waiver program? 39 

What are the future prospects for the waiver program over 

the next few years? 42 

Chapter 1 



This report presents a case study of the Maryland Home and Community-Based 
Services Medicaid Waiver program for persons with Developmental Disabilities. 
The waiver allows the State of Maryland to receive Federal Financial 
Participation (FFP) under Medicaid for home and community-based services 
provided to persons with developmental disabilities that are not otherwise 
covered under the regular State Medicaid plan. 

The Maryland Medicaid waiver program operates under the authority of 
Section 2176 of the Omnibus Budget Reconciliation Act (OBRA) of 1981. Under 
Section 2176, the Department of Health and Human Services may approve waivers 
to States for Medicaid coverage of certain home and community-based services 
provided to persons who are at risk of placement in long-term care 
institutions. The Home and Community-Based Medicaid Waiver Program, as it is 
generally known, is an attempt to address an institutional bias in Medicaid 
eligibility and service coverage policy. Prior to enactment of the Section 
2176 waiver authority, Medicaid coverage of long-term care services was largely 
restricted to care provided in institutional settings. 

Although Home and Community-Based Medicaid waivers represent an expansion 
in the types of services which are eligible for Federal Financial Participation 

Report to Congress: Studies Evaluating Medicaid Home and Community-Based 
Waivers . Department of Health and Human Services, Health Care Financing 
Administration, Office of Research and Demonstrations, December 1984. 


under Medicaid, waiver services are expected at the same time to be 

"cost-effective." States are expected to provide waiver services only to 

individuals who are otherwise at risk of placement in a Medicaid-certif ied 

long-term care facility. In Maryland, this means that persons provided waiver 

services are expected to otherwise be at risk of placement in an Intermediate 

Care Facility for the Mentally Retarded (ICF-MR), the cost of which would be 

covered by Medicaid. At the aggregate level, expenditures for waiver services 

are expected to be offset by reduced expenditures for ICF-MR care. In this 

manner, Medicaid waiver programs are expected to be "cost-effective." 

The Home and Community-Based Medicaid waiver program has proven to be an 
extremely popular financing mechanism for States. Almost every State now 
operates at least one waiver program for either elderly, disabled, 
developmentally disabled, or chronically mentally ill persons; 37 States 
operate waivers for persons with mental retardation and other developmental 
disabilities. In FY 1987, total Federal/State spending for home and 
community-based services under the Medicaid waiver program had reached $505 
million, of which $292 million (57.8%) were attributable to waivers for the 
developmentally disabled. Thus, at the national level, the Section 2176 waiver 
program represents a major policy expansion of the Medicaid service benefit 
package beyond the traditional "medically oriented" services that are normally 
covered by Medicaid. 

The Maryland Medicaid Waiver: A Program Description 

The Maryland waiver program for the developmentally disabled (DD) was 
originally approved by the Health Care Financing Administration (HCFA) with an 
effective date of February 12, 1984. In 1987, the Maryland Developmental 
Disabilities Administration (DDA), which administers the waiver program, 
applied and received a renewal of the original three-year waiver for an 
additional five years. The effective date of the renewed waiver was April 1, 
1987, which was requested by Maryland to coincide with the fourth quarter 
reporting period of the State's fiscal year. The current waiver is effective 
until March 31, 1992. 

Under Medicaid, Federal Financial Participation ranges between 50% and 

77%, depending upon State per capita income. Maryland's FFP rate is 50%. 

The Maryland DD waiver includes four basic service components: 

• Residential Services . The waiver pays community-based providers for the 
cost of residential services provided to waiver clients. Most waiver 
clients reside in three-person residences called Alternative Living Units 
(ALUs), although others live in group homes housing four persons or more, 
while still others are placed in Individual Family Care (IFC), which is 
similar to foster care. The primary cost within this service category is 
the cost of the direct care staff in the client's residence. Various 
staffing models are employed in these residences, depending upon the 
service needs of the residents and the preferred staffing patterns of the 
provider agency. Also included within this service category are 
"consultant services," which include physical, speech, occupational, and 
behavioral management therapies provided directly or purchased by providers 
on an as-needed basis. 

• Day Program Services . All waiver clients participate in some type of day 
program during the regular work week. Under the waiver program, the 
residential provider is the "lead" provider, who arranges for and 
sub-contracts with a day program provider for each waiver client. In some 
cases, the residential provider also operates the day programs for waiver 
clients, but in many cases residential services and day program services 
are provided by distinct agencies. In some cases, particularly in urban 
areas where there are multiple day program providers in the same geographic 
area, waiver clients served by the same residential provider may be served 
by three or four different day program providers. 

• Transportation Services . Transportation services are arranged for and 
provided by the day program provider. Again, the day program provider may 
provide this service directly, or sub-contract with a transportation 
contractor. Since some waiver clients are non-ambulatory, they may require 
the use of specialized vans which can transport wheelchair-bound clients. 

• Service Coordination . Service coordination is the "case management" 
component of the Maryland DD waiver. The Developmental Disabilities 
Administration contracts directly with various agencies to provide service 
coordination for waiver program recipients. In the Southern and Eastern 
regions of the State, service coordination is provided by county health 
departments. In the Central and Western regions, service coordination is 
provided by a private agency, the Frederick County Association for Retarded 

Client Eligibility 

Maryland's is one of the few Medicaid waiver programs for the 
developmentally disabled which is exclusively targeted to "deinstitutionalized" 
clients. Only clients in one of Maryland's eight State Residential Centers, 
its publicly-operated ICFs-MR, are eligible for placement in the waiver 

program. First, persons living in the State Residential Centers (SRCs) who are 
assessed as candidates for community placement under the waiver are placed on a 
list. The Developmental Disabilities Administration then issues a Request for 
Proposals for a specific number of clients to be served under the waiver 
(several rounds of RFPs have been implemented since the start of the waiver in 

Community-based residential providers usually visit the SRCs to interview 
and assess waiver candidates, then submit proposals to serve specific clients. 
Generally, providers submit proposals to serve clients residing in an SRC which 
is located in their own geographical region, although it is entirely possible 
to submit proposals for clients living in other SRCs as well. Proposals are 
generally submitted in units of three clients, or a single Alternative Living 
Unit (ALU). In essence, the proposal contains the provider's estimate of 
starting up and operating a new Alternative Living Unit to serve three waiver 
clients. The proposal includes proposed staffing arrangements and salaries, 
fringe, facility costs, consultants' fees, room and board costs, day program 
costs, and administrative costs. 

In developing proposals, providers attempt to identify three clients who 
they think would make appropriate housemates, and who could live together 
compatibly. In some cases, the clients themselves identify other friends in 
the SRC with whom they would like to live in the community. Although providers 
identify specific clients in their waiver proposals, there is no assurance that 
they will actually get the clients they have bid on. Sometimes multiple 
providers bid on the same clients, so that there is some shuffling of clients 
between the proposal process and actual placement. 

After submission of a proposal, a negotiation process occurs between the 
provider and DDA. In general, these negotiations take place between providers 
and the four Regional Offices of DDA (see Exhibit 1-1 for a map of the four 
State regions). Thus, the rate paid by DDA to serve waiver clients is 
basically a negotiated rate between the State and the provider. 

Once a proposal is accepted, DDA awards the provider a start-up grant to 
develop the new residential facility. This includes money to find, rent, and 































































I— 1 















i— 1 









































l-J M > 

""I CH h-| 






furnish a new ALU, money to recruit and hire direct care staff, and money for 
various other start-up costs. Once the residence is available, a gradual 
transition process for waiver clients is instituted. Provider staff will often 
visit the client in the SRC to acquaint themselves with the client. The client 
may then come visit the residence for a meal or a weekend. Then a placement 
date may be set, and the client is prepared to make the permanent move. In 
many cases, waiver clients have lived at the SRC for the majority of their 
lives, and the transition from the institution to the community is a traumatic 
one. There is often a considerable amount of coaxing which has to be done 
during this transition. If the client has family who are still involved in his 
or her life, the anxieties of the family about community placement often have 
to be addressed as well. 

Once clients have been placed in the community residence, the provider's 
operational grant begins. The payment system employed by DDA in the Medicaid 
waiver is a "grants payment," system, the same system which the State has 
traditionally employed to fund all community-based residential providers, even 
prior to the waiver. Providers are paid quarterly grants for each residential 
program, in advance, in accordance with the negotiated grant amount. Providers 
are required to submit quarterly cost reports, which show the actual costs of 
operating the program versus the negotiated cost. At the end of the fiscal 
year, there is a reconciliation process between the amount of funds received by 
the provider through the grants system and their actual costs. Providers 
rarely operate their programs at a lower cost than what they originally 
negotiated with DDA. The more usual case is for providers to submit 
supplemental budget requests for costs that were unanticipated or 
underestimated in the original proposal. DDA reviews and approves these 
supplemental budget requests on a case-by-case basis, which are paid with 
discretionary funds. However, providers know that the amount of discretionary 
funds available to DDA is limited, and generally operate their programs at 
levels close to their negotiated grant amount. 

Once awarded, grants are not renegotiated each fiscal year. All 
residential providers, both waiver and non-waiver, receive the same 
inflationary increases each fiscal year, as approved in DDA's budget by the 

Quality Assurance Mechanisms 

Maryland employs a multi-tiered quality assurance system in the DD waiver 
program. First, Service Coordinators serve as outside client advocates, who 
visit the client at least every other month, monitor the provider's 
implementation of the Individual Program Plan (Plan of Care), and advocate for 
services. Second, DDA contracts with the Delmarva Foundation, the Peer Review 
Organization in Maryland, to conduct annual re-certifications of the client's 
eligibility for the waiver and to assure that the client is receiving active 
treatment. Since all waiver providers are Medicaid providers, they are also 
monitored annually by the Medical Assistance Compliance Administration through 
Inspection of Care teams. The teams make annual reviews of all waiver clients 
to ensure that the care provided to clients meets Medicaid regulations for 
service quality. Fourth, all residential programs must be licensed and 
certified by DDA. Licensing and certification teams make annual visits to 
inspect residential facilities and certify that programs are being operated in 
compliance with DDA regulations. If licensing and certification procedures 
identify problems at a particular provider agency, Regional Office staff may 
also get involved in doing follow-up monitoring to ensure that problems are 
being corrected. If problems continue to persist, Regional Office staff may 
also be placed in the provider agency on a temporary basis until deficiencies 
are satisfactorily resolved. Finally, most residential program providers are 
monitored by their local county governments, to ensure that their facilities 
and programs comply with local fire, safety and health codes. 

Purpose and Organization of Report 

The purpose of this report is to provide a brief overview of Maryland's 

waiver for persons with developmental disabilities. The Maryland waiver was 

selected for a case study because it is one of the few waivers for the 

developmentally disabled which is exclusively targeted to deinstitutionalized 

Most persons with developmental disabilities are mentally retarded. 

However, the developmentally disabled also include persons with cerebral 

palsy, autism, epilepsy, and other developmentally-related conditions. 

clients. In most waivers for the developmentally disabled, persons living in 
the community who have never been institutionalized are also eligible for 
waiver services if they are determined to be at risk of institutional 
placement. Because Maryland's waiver exclusively serves persons being 
deinstitutionalized from State-operated facilities, the waiver population in 
Maryland is more severely disabled, on average, than waiver populations served 
by most other States. It has also had a markedly different impact on the 
community-based provider system than most other waiver programs for persons 
with developmental disabilities. 

The primary source of information for the study was in-person interviews 
with State officials in the Maryland Developmental Disabilities Administration 
(DDA) and with local residential providers of waiver services. On-site 
interviews were conducted with Executive Directors and Residential Program 
Directors of 15 of the 40 residential providers currently participating in the 
waiver program. These providers account for 424 (59%) of the 716 clients 
presently served under the waiver. Executive Directors of three of the six 
Service Coordination contractors were also interviewed during the study. 
Financial and statistical data were also provided by DDA on various aspects of 
the waiver program and of the Maryland MR/DD service system in general. Annual 
Medicaid statistical data (HCFA 2082 data) on ICF-MR utilization and 
expenditures were also utilized in the analysis. 

The primary objective of this report is to provide readers with a 
discussion of the some of the major policy issues which have emerged during the 
implementation of the Maryland DD waiver program over its first four years. 
The Section 2176 waiver program represents HCFA's first introduction to the 
financing and management of non-institutional service systems for persons with 
developmental disabilities. The nature of this service system, and the policy 
issues associated with it, differ considerably from the issues associated with 
HCFA's management of the ICF-MR program. Further, it is likely that Medicaid 
financing of non-institutional services for the developmentally disabled will 
continue to expand in the future, either under the authority of the Section 
2176 waiver program itself, or under a more permanent financing mechanism. In 
any case, it is apparent that HCFA will become increasingly involved in 
managing both the cost and quality of community-based services for the 
developmentally disabled under the Medicaid program over the coming decade. 


Following this introductory chapter, Chapter 2 provides an overview of the 
implementation of the Medicaid waiver program in Maryland from 1984 through the 
present. The implementation of the waiver is described within the context of 
the entire State MR/DD service system during this period. Medicaid waiver 
programs are but one factor affecting the development of community-based 
service systems for persons with developmental disabilities, and any evaluation 
of Medicaid waivers must be conducted in the context of the other factors which 
are also affecting the MR/DD service system. Chapter 3 then provides a 
discussion of a selected set of policy issues which are presently affecting the 
Medicaid waiver program in Maryland. This discussion is not meant to be 
evaluative or judgmental. Rather its purpose is to highlight some of the 
current challenges and problems faced by the State of Maryland in its 
management and development of Medicaid-f inanced community-based care for the 
developmentally disabled. 

Chapter 2 


The Maryland Medicaid waiver program has been part of a major shift in the 
State's overall service system for persons with developmental disabilities from 
an institutionally-based services system to a community-based services system. 
As shown in Exhibit 2-1, there were only 656 mentally retarded persons in 
community-based residential programs in Maryland in 1980, and over 2,500 
persons in the State Residential Centers (SRCs). By 1988, the average daily 
census of the SRCs had declined by 39%, to 1,533 clients, while the number of 
persons living in community-based residential programs had increased 358% to 
3,007 clients. Put otherwise, 79% of the residential population in Maryland 
was cared for in institutions in 1980. By 1988, the percentage of residential 
placements served in institutions as opposed to community-based programs was 
only 34%. 

How important a factor was the Medicaid waiver program in the shift toward 
community-based services in Maryland? 

The Medicaid waiver program has been an important factor, but only one 
factor in this shift in the Maryland MR/DD service system. Even before the 
Medicaid waiver program had been approved by Congress, Maryland had begun a 
major expansion in its community-based residential system. Funding for 
community-based residential programs had increased from $3.5 million in FY 1980 
to $14.5 million in FY 1984, the year in which the waiver program was first 
implemented. The SRC population had already begun to decline, and the State 
had already been able to close one small 60-bed facility in 1982. Thus, the 
opportunity for Maryland to secure Federal funds to expand community-based 
programs for the developmentally disabled under the waiver came at a time when 
it had already embarked upon a significant community services expansion effort. 


Exhibit 2-1 

Average Daily Census of State Residential Centers and 
Community-Based Residential Programs (Waiver and Non-Waiver) : 1980-1988 







2,600 - 

2,200 - 

1,800 - 

1,400 - 

1,000 - 

Waiver Plus Non— Waiver Clients 

Nan— Waiver Clients 

Source: Developmental Disabilities Administration, Maryland Department 
of Health and Mental Hygiene, 1988. Figures for 1988 and 1989 
are estimated. 


Another factor in the shift was pressure placed upon the State by the 
Federal government. The United States Department of Justice had initiated a 
class action suit against the State of Maryland on behalf of the clients being 
served in the Rosewood Center, Maryland's largest SRC, which in 1983, had an 
average daily population of 1,204 clients. The suit cited deficiencies in 
programming, staffing, client abuse and neglect, environmental conditions and 
inappropriate placement. In February of 1983, the State signed a consent 
decree, which stipulated a 40% reduction of the Rosewood Center population 
through placements in community-based residential settings over a three-year 
period, and a corresponding increase in staffing ratios, programming, and 
environmental quality at Rosewood. Although the waiver program was itself part 
of the consent decree, Maryland applied for and used the Medicaid waiver as a 
means to finance the deinstitutionalization objectives set forth in the consent 

What impact has this expansion in community-based services had on the supply 
of community -based residential providers? 

In the last four years, there has been a major expansion in the supply of 
community-based residential provider agencies in Maryland. By law, all of 
these agencies are private not-for-profit agencies. Prior to the waiver 
program, the community-based service system was dominated by a relatively small 
number of large agencies, which operated both day programs for developmentally 
disabled clients living at home and residential programs funded through 
all-State funds. Local Associations for Retarded Citizens (ARCs), located in 
each county, constituted the largest segment of the community-based provider 

When the waiver program was first implemented, there was a proliferation of 
new provider agencies in the State. Some of these agencies were spin-offs of 
existing agencies, in which second-level managers of existing providers saw the 
opportunity to form their own agency, and secured their initial "business" by 
bidding on waiver clients. In other cases, agencies which had only operated 
day programs decided to expand into residential services by participating in 
the waiver program. In still other cases, agencies which operated in other 
States established new agencies in Maryland. 


DDA encouraged the establishment of new provider agencies under the 
Medicaid waiver program. Although the immediate objective was to meet waiver 
targets for community placements, a secondary objective was to "broaden the 
base" of community-based providers with whom DDA could contract for services. 
The formation of new providers was also essential to meeting waiver program 
targets, since many existing providers were not willing, or capable, of growing 
at the rate it would have required to serve the projected waiver population. 

In consequence, the community-based provider network has grown from a small 
number of residential program providers prior to the waiver to a current supply 
of 67 agencies across the State providing residential services in 
community-based settings to waiver and/or non-waiver clients. Of these 67 
agencies, 40 participate in the waiver program, and 27 serve non-waiver clients 
only. Of the 40 agencies participating in the waiver, 35 operate programs for 
both waiver and non-waiver clients, and 5 serve waiver clients exclusively. 

This growth in the supply of community-based provider agencies is one of 
the important policy issues in the Maryland Medicaid waiver program, and is 
discussed further in Chapter 3. As a result of this growth, the character of 
the community-based provider network has changed dramatically over the last 
four years. A major issue is to what extent this growth in supply has affected 
the quality of community-based care for persons served under the waiver. 

Has the growth of the waiver program met original projections? 

In approving Medicaid waivers, HCFA places limits on the number of waiver 
recipients who can be served in each waiver year, and on the total amount of 
expenditures which States may claim for waivered services. Exhibit 2-2 
presents the HCFA-approved limits for Maryland's DD waiver program for the 
eight years for which the waiver has been approved (1984 through 1992) and 
actual recipients and expenditures for the first four years of the waiver's 

In terms of recipients, Maryland's waiver population has grown relatively 
close to the HCFA-approved limits. There are currently 716 clients being 
served in the waiver program, compared to an approved limit of 868 recipients. 


Exhibit 2-2 

Approved and Actual Growth in the 


DD Waiver 




Waiver Year 



$ 6,790,310 


1 (1984-85) 

$ 3,617,719 

2 (1985-86) 




$ 9,093,423 

3 (1986-87) 





4 (1987-88) 





5 (1988-89) 



6 (1989-90) 



7 (1990-91) 



8 (1991-92) 



Sources: Maryland waiver applications and HCFA 372 reports, 


However, Maryland's expenditures for waiver services have lagged considerably 
behind its original projections, for two major reasons. First, there have been 
considerable delays in getting new residential programs started. Maryland 
cannot begin claiming for waiver services until a recipient is actually moved 
from the institution to the community. Providers encountered all of the usual 
problems of finding and leasing appropriate residences, hiring staff, preparing 
the client for transition to the community, and so on. Projected expenditure 
levels assumed that all clients would receive a full year of waiver services, 
when, in actuality, recipients received waiver services for less than a full 

One measure of these delays in program start-up is the average number of 
days which waiver clients were enrolled in the waiver program in a given year. 
These data are available on Maryland's HCFA 372 reports, which report total 
recipients served during the year and total days of waiver coverage. In the 
first year, waiver recipients were in the program an average of only 182 days, 
exactly half a year. Thus, expenditures for waiver services in the first year 
really reflect only a half year of coverage. The average number of 
waiver-covered days for recipients served in the second year was 254 days, and 
in the third year, 236 days. The average declined in the third waiver year 
because Maryland had implemented a new wave of community placements, and delays 
in program start-up again reduced the average time which waiver recipients were 
served in the community. 

The level of expenditures for waiver services has also been less than 
projected because Maryland is unable to claim certain costs for waiver clients 
served in the program. First, because the residential model most frequently 
employed in the Maryland Medicaid waiver program is the three-person 
Alternative Living Unit, Maryland pays higher room and board costs for waiver 
clients than most other States, where waiver clients generally live in larger 
residential facilities. For example, in FY 1988 awards made to waiver 
providers under the DDA grants payment system, $3.5 million of the $27.5 
million in total grant awards (12.7%) were for room and board costs. These 
costs are not eligible for Federal Financial Participation. The average annual 
cost per waiver recipient for room and board costs was $4,826. Room and board 
costs in most waiver programs are almost totally financed by client SSI 


contributions (the reason why they are not recoverable through FFP). In 
Maryland, cclient contributions cover only 61% of these costs. Therefore, in FY 
1988, Maryland paid $1.3 million in room and board costs for waiver clients 
from 100% 'State funds. l 

Further, Maryland can only receive FFP for days on which waiver clients 
actually receive waiver services. If clients go "on leave" from their 
residential program to visit with their families on weekends or holidays, go on 
vacation, or are temporarily placed in an in-patient facility, the State does 
not receive FFP for the days for which the client was out of the program. 
Providers submit "invoices" to DDA, showing attendance records of their waiver 
clients in their residential programs. (These are not real invoices since 
providers are paid quarterly through the grants payment system; they are only 
used as documentation in claiming FFP). Turnover among waiver clients also 
creates vacancies in waiver-funded residential programs (e.g. if a waiver 
client must be re-institutionalized and another community placement of an 
institutionalized client made). Since these client leave days and vacancies do 
not reduce the real cost to providers of operating residential programs, DDA 
still pays providers for the cost of these days. In FY 1987, DDA estimates 
that it paid waiver program providers about $500,000 for days which were not 
eligible for FFP under the waiver. 

Currently, the Maryland DD waiver is operating about one year behind its 
original projections. In its approved waiver renewal, Maryland projected 
making another 160 placements in the first year of the new waiver (April 1987 
through March 1988). For a number of reasons, Maryland chose not to move ahead 
with these community placements, and only placed clients to fill existing 
program vacancies. However, it presently intends to place these additional 160 
clients in two phases in FY 1989. In the first phase, Maryland plans to place 
an additional 72 clients, and close another building at the Great Oaks Center 
by the end of the fiscal year (June 1989). In the second phase, DDA plans to 

Waiver clients are allowed to keep $100 of their SSI income each month for 

personal expenses and must contribute the remainder of their income towards 

room and board costs. Since waiver clients are not eligible for State 

Supplementation Payments (SSP) in Maryland, the general rule is that clients 
keep $100 of their Federal SSI benefit of $354 per month, and contribute $254 
towards room and board. 


place an additional 88 clients into the waiver, and close another SRC, the 
Highland Health Facility, by the end of the same year. 

What are the characteristics of persons served under the Medicaid waiver 
gf§g?am in Maryland compared to waiver recipients in other States? 

Waiver recipients in the Maryland DD waiver program are, on average, more 
severely disabled than waiver recipients in other States. They are also 
somewhat older, as shown in Exhibit 2-3. In Maryland, only 4.3% of waiver 
recipients are children under age 21, compared to 20.5% of all DD waiver 
recipients. On the other hand, 44.7% of all waiver recipients in Maryland are 
over the age of 40, compared to 25.0% of DD waiver recipients nationally. 
Maryland also serves a higher proportion of male recipients (63%) than the 
national average (56%). 

Exhibit 2-3 

Age Distribution of Waiver Clients in Maryland 
Compared to All DD Waiver Programs 

Age Maryland All DD Waivers 

0-14 0.9% 9.9% 

15 - 21 3.4% 10.6% 

22 - 39 50.9% 54.5% 

40 - 64 39.4% 22.8% 

65+ 5.3% 2.2% 

Total 100.0% 100.0% 

Sources: Third Annual Survey of Section 2176 Home and Community-Based Medicaid 
Waiver Programs conducted by La Jolla Management Corporation, 1987. Data 
reflect waiver program caseloads as September 30, 1986. Data for all waiver 
recipients reflect data received from 25 of 38 DD waiver programs who were able 
to provide age distribution data on their waiver populations. 

A much higher percentage of waiver recipients in Maryland also have a 
diagnosis of mental retardation in the severe to profound range than 


developmentally disabled recipients in other States, as shown in Exhibit 2-4. 
In Maryland, almost 77% of all waiver recipients had a diagnosis of mental 
retardation in the severe to profound range, compared to an average of 49% in 
all waiver programs for the developmentally disabled. As also shown in Exhibit 
2-4, the distribution of waiver recipients by level of retardation in Maryland 
more closely resembles the overall distribution of residents of State-operated 
residential facilities than it resembles that of other State waiver 

Exhibit 2-4 

Level of Retardation of Waiver Recipients in Maryland Compared 
to All DD Waiver Recipients and Residents of State-Operated 

Residential Facilities 

Level of 








All DD 



Residents of 















Totals 100.0% 100.0% 100.0% 

Sources: Third Annual Survey of Section 2176 Home and Community-Based Medicaid 
Waiver Programs conducted by La Jolla Management Corporation, 1987 and 
University of Minnesota, Persons with Mental Retardation in State-Operated 
Residential Facilities . Data for waiver recipients reflect caseloads as of 
September 30, 1986. Data for residents of State-operated facilities reflect 
residents as of June 30, 1985. Data for all DD waiver recipients reflect data 
from 25 of 38 DD waiver programs who were able to provide data on level of 
retardation for their waiver populations. 

Waiver recipients in the Maryland DD waiver program also have significant 
deficits in activities of daily living. According to survey data reported by 
Maryland, 7.4% of waiver clients are not toilet trained, 14.3% cannot walk, 
without assistance, 62.5% cannot dress without assistance, and 37.2% cannot 
communicate verbally. 


What impact has the DD waiver had on ICF-MR utilization and expenditures in 

It is difficult, if not impossible, to establish a causal relationship 
between the Medicaid waiver and subsequent ICF-MR utilization and expenditure 
trends. This is due to the fact that even if Maryland had not secured the 
waiver from HCFA to receive Federal Financial Participation for the cost of 
community placements, Maryland would still have had to comply with the terms of 
the consent decree with the U.S. Department of Justice. Without the waiver, 
Maryland may have pursued other alternatives, such as developing small-scale 
ICFs-MR, or investing more of its resources in improving conditions at Rosewood 
Center. It would probably not have been able to finance the community services 
expansion which occurred under the waiver with all State funds. 

In any case, it is clear that the community placements made under the 
Medicaid waiver program have had a substantial impact on reducing ICF-MR 
utilization and expenditures in Maryland. In 1984, the year in which the 
waiver program was implemented, the average daily population in Maryland's 
State Residential Centers stood at 2,168. Since that time, 716 of these 
persons (33%) have been placed in community-based residential programs under 
the waiver. Today, the average daily population of the SRCs stands at 1,533, a 
net reduction of 635 recipients. 

As shown in Exhibit 2-5, Maryland's ICF-MR utilization rate is now 
considerably below the national average. Even prior to the waiver, the number 
of ICF-MR recipients per 100,000 population in Maryland was already below the 
national average. In 1984, there were 47 ICF-MR recipients per 100,000 
population in Maryland, compared to 60 recipients per 100,000 population 
nationwide. Since 1984, the national ICF-MR utilization rate has remained 
flat. In Maryland, the ICF-MR utilization rate declined to 37 recipients per 
100,000 population, a 21% reduction. 

Medicaid expenditures for ICF-MR services have also declined (in real 
dollars) since the waiver program was implemented. Between 1984 and 1987, 
ICF-MR expenditures in Maryland increased from $60.6 million to $65.5 million, 
an increase of 8.1%. In the United States as a whole over the same period, 


Exhibit 2-5 

ICF-MR Recipients Per 100,000 Population : 
United States and Maryland 


64 - 
62 - 
60 - 
58 - 
56 - 
54 - 
52 - 
50 - 
48 - 
46 - 
44 - 
42 - 
40 - 
38 - 
36 - 
34 -• 

United State 


— I 


— I 


— I 


— I 


— I 





Source: HCFA 2082 data, Bureau of Data Management and Strategy, 


ICF-MR expenditures increased from $4.3 billion to $5.5 billion, an increase of 
28.9%. In inflation-adjusted dollars, ICF-MR expenditures actually declined by 

10.5% in Maryland over this three-year period, while nationwide, expenditures 

increased by 6.2% in real dollars. 

Given that the average daily population of the State Residential Centers in 
Maryland has declined by 30% since 1984, why have ICF-MR expenditures declined 
by only about 10% in real terms? There are two primary reasons. One is that 
the waiver has had less of an impact on ICF-MR utilization than on total 
utilization of SRCs. When the waiver was implemented in 1984, Maryland still 
had a number of licensed beds in its SRCs which were not ICF-MR certified 
beds. Although Maryland had been working to reduce the number of uncertified 
beds in its SRC system prior to the waiver, there were still a number of beds 
which did not meet ICF-MR standards of care. Although all persons placed into 
the waiver program were in an ICF-MR certified bed prior to placement, in some 
cases the placement of an ICF-MR recipient into the community was followed by a 
transfer of another SRC recipient from an uncertified bed to a certified one. 
The result of this process was a more steep decline in the number of total SRC 
beds than in the number of persons in ICF-MR certified beds, as shown in 
Exhibit 2-6. 

The second reason why ICF-MR expenditures have not declined more rapidly is 
that reductions in utilization do not necessarily translate into reductions in 
costs. Although the population of the SRCs have declined considerably, it is 
also true that the fixed costs of operating the SRCs have become spread over 
fewer clients. The result is that average costs per ICF-MR recipient in 
Maryland have increased substantially, as shown in Exhibit 2-7. In 1984, the 
average annual cost per ICF-MR recipient in Maryland was almost exactly the 
same as the national average, at $29,951. By 1987, Maryland was spending an 
average of $38,986 per recipient, about 6.4% higher than the average spent in 
all other States. 

To some extent, higher costs per ICF-MR recipient in Maryland reflect the 

higher cost of serving a residual population with higher service needs than the 

ICF-MR population served in other States. Yet despite the increased resources 

being spent on the recipients who remain in Maryland's SRCs, the State is 

Expenditures were adjusted for inflation using the medical care component 

of the Consumer Price Index for all urban consumers. Source: Social 

Security Bulletin , Vol. 51(1), January 1988, Table M-39. 


Exhibit 2-6 

Number of Licensed SRC Beds and Number of 
Recipients in ICF-MR Certified Beds: 1980-1987 

2,700 _ 

2,500 _ 

1,900 _ 

Licensed SRC Beds 

Recipients in ICF-MR Certified Beds 

— I 1 — 

1960 1981 

— I 1 

1 986 1 987 





Source: Developmental Disabilities Administration, Maryland Department 
of Health and Mental Hygiene, and HCFA 2082 data, Bureau of 
Data Management and Strategy. 


Exhibit 2-7 

Average Annual Costs Per ICF-MR Recipient 
United States and Maryland 

$38,000 - 

I $34,000 

$30,000 - 

I $26,000 

< $22,000 - 



United States 

1 1 1 1 1 1 1 1 

1980 1961 1982 1983 1984 1985 1986 1987 

Source: HCFA 2082 data, Bureau of Data Management and Strategy. 


having continuing problems maintaining Federal certification of its ICF-MR 
beds. In February of 1988, the Health Care Financing Administration notified 
Maryland that conditions at the Rosewood Center, Maryland's largest SRC "posed 
an immediate and serious threat to the health and safety of residents." 
Deficiencies cited by HCFA included the lack of an operational system for 
analysis and follow-up of incident and injury reports, abusive treatment of 
residents by other residents and by themselves, insufficient staff for control 
and discipline of residents, and overly hot water temperatures in resident 
bathrooms. Maryland responded to this threat of de-certification of the 
Rosewood Center with a corrective action plan, which was implemented 
immediately. In April of 1988, HCFA surveyors re-visited the facility and 
rescinded the threatened termination of ICF-MR certification of the entire 
Center, although one of the cottages at the Center was de-certified. 

Hew do Medicaid and total Federal costs under the waiver compare to the costs 
of ICF-MR care? 

Comparing average annual costs for waiver recipients with average annual 
costs for ICF-MR recipients is misleading due to client movement in and out of 
both types of service arrangements. As previously discussed, waiver clients 
may be in an ICF-MR for part of the year, then placed in the community for the 
rest of the year. Also, the waiver will not pay for days in which the waiver 
client is not residing in a waiver-covered residential program. In brief, 
average annual costs do not adjust for varying lengths of participation in each 
type of service. Thus, a more accurate comparison is to compare the average 
daily cost of ICF-MR care to the average daily cost of waiver-covered care. 

These data are provided in the annual HCFA 372 reports, on which States 
report total expenditures for waiver and ICF-MR care per waiver year and also 
total days of coverage for both types of services. Data provided on Maryland's 
HCFA 372 reports for the first three years of the waiver (February 1984 though 
February 1987) are presented in Exhibit 2-8. In the first year of the waiver, 
the average daily cost per waiver client was $65.22, 64% of the average daily 
cost of ICF-MR care, which was $101.44. In the waiver's third year, the 
average daily cost per waiver client had risen to $86.43, 69% of the average 
daily cost of ICF-MR care, which was $124.43. 


Exhibit 2-8 

Average Medicaid Cost Per Day of 
Waiver-Funded Care and ICF-MR Care: 
Waiver Years One to Three 








♦ 120 - 

$110 - 

*100 - 

Source: Maryland HCFA 372 Reports. Waiver Year One: February 13, 1984 

through February 12, 1985; Waiver Year Two: February 13, 1985 

through February 12, 1986; Waiver Year Three: February 13, 1986 
through February 12, 1987. 


These figures do not represent the actual total State and/or Federal costs 

of serving clients in both types of service arrangements. For most waiver 

clients, the Federal government also pays Supplemental Security Income (SSI) 

benefits. In 1986, the third year of the waiver, the Federal SSI benefit level 

was $336.00 per month. Assuming that all waiver clients were eligible for the 

full benefit level, this would add an additional $11.05 to the daily cost of 

care paid entirely by the Federal government. As previously discussed, the 

State also incurs additional costs for waiver clients which are not recoverable 

through the waiver. These include room and board costs not covered by client 

SSI payments, and the costs for days on which waiver clients are absent from 

their community program, for one reason or another. These unrecovered amounts 

add about another $9.50 in daily costs for waiver clients paid entirely by the 

State. The only additional cost for ICF-MR recipients is the Federal cost of 

SSI payments. Since ICF-MR recipients are only eligible for SSI benefits of 

$25 per month, SSI payments only add $0.82 to the average daily cost of ICF-MR 

care. Estimated total State and Federal costs per day for waiver clients and 

ICF-MR clients in the third waiver year (February 1986 through February 1987) 

are presented in Exhibit 2-9. 

Exhibit 2-9 

Estimated Daily Cost For Waiver Care and For 
ICF-MR Care in Waiver Year Three: (1986-87) 

ICF-MR Care 

$ 0.00 




Total $106.98 $125.25 

Total Federal 54.27 63.04 

Total State 52.71 62.21 

Source: Maryland HCFA 372 reports, and data provided by Maryland Developmental 
Disabilities Administration on unrecovered costs. 

Waiver Care 

Waiver Services 


ICF-MR Services 


Federal SSI payments 


Unrecovered costs 


Actually, only about 80% of waiver recipients receive SSI. However, the 

primary source of income for clients who do not receive SSI benefits is 

Social Security Disability Insurance (SSDI), also paid by the Federal 


26 • 

There are still other State and Federal costs for waiver clients and ICF-MR 
clients not included in Exhibit 2-9, for which data are not available. Some 
waiver clients may receive Food Stamps, Section 8 housing subsidies, and other 
Federal benefits not included in the figures cited above. Further, Exhibit 2-9 
does not include the costs of Medicaid-covered acute care services provided to 
waiver clients and ICF-MR clients. These costs are also provided on HCFA 372 
reports. According to these data, ICF-MR recipients used an average of $2.09 
in Medicaid-covered acute care services per day of institutional coverage, 
while waiver recipients used only an average of $0.45 per day for acute care 
services covered by Medicaid. 

Given that ICF-MR recipients may be more medically involved than waiver 
recipients, these cost differences may reflect differing needs for medical care 
among the two populations. However, they may also reflect differences in 
access to medical care. For example, 42% of all ICF-MR recipients were 
provided physicians' services covered by Medicaid in the third waiver year, 
compared to just 22% of waiver recipients. At the same time, some waiver 
providers indicated during interviews that they had negotiated special 
contracts with health care providers to provide medical services to their 
waiver recipients. These contracts were paid for through the grants received 
from DDA under the waiver. Providers indicated that they had negotiated 
special contracts as a means of increasing access to medical services for their 
clients, given the generic problems of medical care access faced by all 
Medicaid beneficiaries in Maryland. 

Data on the average cost per waiver recipient also masks considerable 
variation in costs across providers and clients. In FY 1988, the Medicaid 
waiver cost per client (excluding room and board) ranged from $22,502 per year 
to $41,292 per year. These variations in waiver client costs reflect the 
result of negotiated costs between providers and DDA. The major reason for 
these variations are differences in the service needs of the clients, although 
geographic variations in salary, housing, and other price inputs are also a 
factor. In general, providers who participated in the early phases of the 
waiver program had lower negotiated costs than those who entered the waiver 
program at a later date. 


What impact has the DD waiver had on aggregate Medicaid spending for the 
developmentally disabled in Maryland? 

Although the implementation of the DD waiver program was definitely 
associated with a decline in Medicaid expenditures for ICF-MR care, an 
additional research question is whether total Medicaid spending for MR/DD 
services have been positively impacted by the waiver program. This question is 
difficult to answer definitively because it requires evaluation methods to 
estimate what aggregate Medicaid spending for ICF-MR care would have been if 
the DD waiver program had not been implemented. One less definitive approach 
to addressing this question is simply to compare aggregate Medicaid spending 
per capita (ICF-MR plus waiver care) in Maryland to aggregate Medicaid spending 
per capita nationwide, since the implementation of the waiver. 

These trends are presented in Exhibit 2-10. Although per capita spending 
for ICF-MR services in Maryland has clearly declined relative to per capita 
spending for ICF-MR services nationwide, waiver spending in Maryland has risen 
at a far greater rate than waiver spending in other States. Together, 
aggregate Medicaid spending in Maryland for MR/DD services is much closer in 
line to aggregate Medicaid spending for MR/DD services in the United States as 
a whole. Aggregate spending for Medicaid-covered services (ICF-MR plus waiver 
services) increased at an annual compound rate of growth of 11.5% in Maryland 
between 1983 and 1987, compared to 8.3% nationwide. Nonetheless, aggregate 
spending in Maryland was still significantly below the national average in 
1987. In sum, Maryland has definitely increased its use of Medicaid as a 
financing mechanism for MR/DD services over the last five years, but it has 
done so through increased investment in community-based services under the 
waiver, rather than through increased investment in ICF-MR certified 


Exhibit 2r-10 

Total Medicaid Spending Per Capita : 
United States and Maryland 










$24 - 

•21 - 
•20 - 
•14 - 
•13 - 
•11 - 

ICF-UR + Waiv«r 


ICF-MR + Waiver 

United Stat 



— i 1 1 — 

1980 1981 1982 

— I 1 1 

1 983 1 984 1 985 

1986 1987 

Spending per capita was calculated by dividing Medicaid expenditures 
by total U.S. or Maryland population. Source: HCFA 2082 data, 
Bureau of Data Management and Strategy (ICF-MR expenditures) and HCFA 
64 data, Division of State Agency Financial Management. 


Chapter 3 


This chapter provides a brief discussion of some of the current program and 
policy issues in the Maryland DD Waiver program. Although the waiver program 
has clearly been successful in reducing the institutionalized population in 
Maryland, it has also had a major impact on the community-based service 
system. This expansion of the community-based service system in Maryland has 
created new problems in program management and service quality. Although HCFA 
is concerned with the cost-effectiveness of Medicaid waiver services in terms 
of the relative costs of waiver-funded services and ICF-MR care, it is also 
concerned with what it is buying in terms of standards of care on both sides of 
the equation. Relative to the ICF-MR program, waiver-funded services are less 
regulated and monitored by HCFA, but as Medicaid financing of community-based 
services continues to expand, it is clear that HCFA will become increasingly 
involved in ensuring that the services it is purchasing through home and 
community-based waiver programs meet appropriate and adequate standards of 

What stresses have been placed on the community-based service system as a 
result of the DD waiver program? 

The Maryland DD waiver program has put substantial stress on the 
community-based service system. Through both waiver and non-waiver community 
expansion, the community-based residential care system has almost doubled in 
size between 1983 and 1988, from about 1,400 residential clients, to over 2,700 
clients. Day programs, transportation services, and other client support 
services have been forced to expand at a similar pace. 

One strategy employed by the State in achieving this level of expansion was 
to support the establishment of new community-based providers. The State 
actively encouraged the development of new agencies, and was supportive of 


individuals and groups who expressed a desire to start new agencies. Further, 
the resources were made available to help new provider agencies get started. 
Start-up money was available for new agencies to get residential programs up 
and operating, and the grant amounts available to serve waiver clients were 
more adequate than those for non-waiver clients. Whereas providers of 
non-waiver residential programs had traditionally had to rely on fund raising 
efforts to supplement inadequate reimbursement from the State, waiver providers 
were generally granted adequate funding to operate their programs without 
private funds. 

One issue is the quality of the providers who got started under the waiver 
program. During the initial implementation of the waiver, the State was 
encouraging the establishment of new residential program providers to serve 
waiver clients. Also, some agencies which had, until then, operated relatively 
small programs, used the waiver as an opportunity to greatly expand their 
existing operations. Some respondents, generally those in the more established 
provider agencies, questioned whether some of these new agencies had the proper 
experience and credentials to expand so rapidly. 

In conducting interviews, it appeared as if there were almost two separate 
camps of residential providers. On the one hand, there were the older, more 
established agencies, which generally had taken on only a few waiver clients, 
and who were more oriented towards the community-based population which had 
never been institutionalized. On the other hand, there were the relatively new 
providers who had become initially established, or who had grown very rapidly 
in recent years, due to expansions under the waiver. 

Why didn't the existing providers participate more extensively in the 
waiver program? For one, existing providers had less of a need to expand — many 
were already very sizeable agencies — and second, many indicated that they were 
concerned with the impact which rapid expansion would have on the quality of 
their programs. 

"We know that there is absolutely no way you can take on 30 new 
clients and maintain program quality. It's difficult enough just 
getting one or two new ALUs going each year. Besides, the State 
wasn't courting existing providers. They wanted some new providers in 
the system." 


On the other hand, some respondents indicated that existing providers were 
not that interested in serving waiver clients. 

"They [existing providers] are more oriented toward community 
clients. They're run by the parents on their boards, who are 
naturally more concerned with their own children. Institutionalized 
clients don't have that kind of advocacy. The State had to get some 
new providers if they were going to meet their quotas." 

In sponsoring new providers under the waiver, there were a few disasters. 
One agency was unsuccessful in getting started, spent a lot of start-up money, 
and then folded. Another agency had to be brought in to take over their waiver 
caseload. In some cases, waiver clients had to be re-institutionalized or 
transferred to other agencies willing to take them. In another case, there was 
evidence of fraud on the part of a new provider agency prior to folding, which 
made the local papers. Other new providers, particularly those which expanded 
extremely rapidly under the waiver, have had continuing operational problems in 
terms of maintaining staff and meeting quality standards. On the other hand, 
there are success stories of new agencies being started by competent personnel 
who have worked extremely hard in developing new programs, and have met the 
challenge of providing quality services to a difficult population of clients. 

One issue is whether the State could have moved more slowly in implementing 
the waiver, and developed the community-based system at a more conservative 

"Moving more slowly was not an option. They [the State] had to meet 
the quotas set in the consent decree with the Justice Department. 
Getting these people out was obviously their first priority — quality 
was not their major concern." 

Also, although there have been obvious problems associated with the rapid 
expansion of community-based providers over the short term, the State perceives 
the expanded supply of providers as ...."a godsend, that gives us a much 
broader base of providers with which to expand further. Moreover, it gave us 
the opportunity to develop more medium-sized providers that tend to operate 
more individualized programs. Many of the existing providers had gotten too 

Furthermore, some thought the State should be given credit for 
accomplishing what they did in meeting their quotas. 


"There are a lot of problems in the system, no doubt about it. But at 

least they got these people out of the institutions. No one should have 

to live at Rosewood. First, you get the programs going, then you worry 
about quality." 

How are staffing problems affecting the quality of Medicaid waiver services? 

If there was a single overriding issue in interviews with waiver program 
providers, it was the problem of recruiting and keeping direct care staff to 
work, in residential programs. Many of the quality problems in the community 
care system relate to the problem of attracting and keeping direct care staff. 
Every provider had staffing vacancies. Providers indicated that the average 
direct care staff person stayed on the job only six months. High staff 
turnover at many providers has also increased costs due to the necessity of 
paying overtime for other staff to cover the residence. 

The consensus among providers was that it was not possible to attract 
quality staff at the wages they could afford to pay. Most entry level staff 
earned between $4.50 and $5.50 per hour, or between $9,500 and $11,500 per 
year, although most earned more than that due to overtime. 

"The quality of our staff has definitely gone down over the last few 
years. Why should someone come to work with us for $5.00 per hour and 
have to work with difficult clients, when they can go flip hamburgers 
for $6.50? Plus, we're getting clients with more and more behavior 
problems, and the staff aren't prepared to handle them." 

Respondents also referred to the "bad apples" in the system — people who 
have been fired by one agency for stealing, client abuse, or some other 
reason — and are immediately hired by another agency because they are so 
desperate for staff. In response, the licensing and certification division of 
DDA is developing a central registry of persons who have been accused of client 
abuse or neglect in DDA-operated programs. Before hiring new staff, providers 
will now be required to ensure that the new hire is not listed on this 

Since most providers received significantly higher reimbursement rates for 
waiver clients than they received for non-waiver clients, an obvious question 
was why they weren't able to raise salary levels in waiver-funded programs. 
There were generally two answers to this question. One was that it was not 


possible to pay staff in a waiver home more than staff in a non-waiver home, 
for internal management reasons. Although waiver clients, on average, were 
more severely disabled than non-waiver clients, many clients in non-waiver 
homes were equally involved as waiver clients, so that higher salary levels in 
waiver homes could not be justified on the basis of more difficult clients. 
Second, providers claimed that DDA regulations for waiver-funded homes required 
more staff per home, and more supervisory staff, than non-waiver homes, so that 
higher reimbursement rates for waiver clients generally went to pay for more 
staff, rather than for more highly paid staff. Many waiver-funded ALUs had 
staffing patterns of two staff to three clients during waking hours, as opposed 
to one staff to three clients in many non-waiver homes. Further, in some 
homes, providers had to have awake staff in the residence at all times because 
clients required continual supervision and monitoring. 

"The screwball in the system is not the waiver program, it's the 
non-waiver side. You can't just raise salaries in the waiver program, 
it's got to be done systemwide." 

Not all respondents believed staffing problems were just a matter of low 
wages. Some have tried to address the staffing issue through the use of 
alternative staffing patterns. Many try to be as flexible as possible in 
scheduling hours for residential program staff, so that staff can attend school 
or also work at other jobs. One provider has opted to use married couples as 
residential counselors. This provider believed that a married couple provided 
a more stable family environment for their clients, that married couples tended 
to be more stable in their own lives, and that this pattern allowed at least 
one spouse to supplement their income with another job. 

In other cases, entirely different residential program models were being 
tried. One Director had started his agency with the idea of developing an 
entirely different approach to staffing residential programs. 

"I began this agency with the idea that our primary objective was to 
control turnover in staff. You can't provide quality services to 
developmentally disabled people unless the staff who work most 
directly with them every day are quality people. And you can't keep 
quality people unless you treat them right. We have a very flat 
organizational structure here — there's me, one residential program 
director, and then everybody else." 


However, this provider was also able to benefit from a unique set of 
circumstances, not available to other agencies. The agency was affiliated 
with the Special Education department of a local State college, and 
exclusively used graduate students for residential program staff. The 
graduate students got free room and board, a salary, financial support for 
tuition, and also direct experience in the field of their degree. In 
return, the provider got direct care staff of high quality who had both an 
intellectual and professional interest in their jobs. 

The other advantage of this model is that it combined direct care 
positions and supervisory positions into a single job. In most agencies, 
direct care staff report to supervisory staff who also handle the 
paperwork, who may report to residential program directors, who report to 
Executive Directors. 

"You know, the other day I was talking with the Director of another 
agency and he was bemoaning the fact that his direct care staff were 
so bad that he was going to have to hire three more supervisors. He's 
got it all wrong. He needs to figure out how to get better direct 
care staff, not hire more supervisors!" 

The other program model that is being tried to address the staffing Issue 
is the Individual Family Care (IFC) model, which is essentially a foster care 
model. In this model, providers sub-contract with individual families to take 
a waiver client into their home. This model has proven to be particularly 
effective in tapping a different, but appropriate, labor pool. IFC providers 
tend to be low-income, middle-aged women, many of whom are single, widowed, or 
divorced, whose own families have grown up and moved out of the house. Many 
have some background in the health care field as nurses or aides, and are 
typically nurturing-type people. Although they may live alone, most have large 
extended families who can provide back-up and respite. Although this model was 
only being used by a few providers, it was perceived positively as one solution 
to the labor supply problem for direct care staff. It was not considered an 
appropriate model for all types of waiver clients. 

Other respondents expressed the belief that lack of training was another 
major factor contributing to high turnover rates among direct care staff. 


Turnover among residential program staff is not attributable solely to low 
wages, but to the stresses of working with an increasingly difficult client 
population. Without training, staff are more fearful of clients, and do not 
know how to respond when clients are acting out. DDA has proposed that a 
training program be instituted in which new staff at community-based agencies 
would be trained at the SRCs before working in the community. This would allow 
new staff to observe how experienced staff at the SRCs work with clients. 
Given the very high turnover rates in community-based programs, there is very 
little transfer of knowledge from experienced staff to new staff. However, 
this proposal has never gotten off the ground. 

Staffing problems have been exacerbated by very low increases in provider 
reimbursement rates over the last three years. In the first three years of the 
waiver, residential program rates were increased by only 4.5% in the first 
year, 2.5% in the second year, and 2.9% in the third year. All providers, once 
their initial grant is negotiated, receive the same increases. To specifically 
address the problems of low wages for direct care staff, the legislature 
approved $3.2 million for salary enhancements in FY 1988. Due to delays in 
calculating the most appropriate allocation method, however, these salary 
enhancement funds have yet to be distributed. 

Respondents were generally pessimistic about any solution to the problem of 
high staff turnover in residential care programs. Although some alternative 
program models were being tried as ways of addressing the problem, most thought 
the problem would not be resolved without a significant increase in 
appropriations for community-based programs that could be translated into 
higher salaries for direct care workers. Better training, and better working 
environments, were also considered important factors in improving staff 
recruitment and retention in community-based programs. 

To what extent are resources available to assist providers in serving clients 
with behavioral and/or medical needs? 

Increasingly, clients served under the waiver are either behaviorally or 
medically involved, or both. A significant number have dual diagnoses of 
mental illness and mental retardation. Some clients are incontinent, some 
display inappropriate sexual behavior, some become physically aggressive when 


stressed, and others run away at every opportunity they get. Many providers 
stated that they did not expect the level or intensity of behaviors exhibited 
by their waiver clients. Although most all providers had interviewed 
prospective waiver clients while they were still at the SRCs, and had reviewed 
their records, many claimed that the level of behaviors was more severe than 
originally anticipated. Some respondents went so far as to claim that the 
State and the SRCs had placed the more difficult clients on the waiver 
placement list, rather than those who were most appropriate for community 

Almost all respondents stated that the support services needed to develop 
effective behavioral management programs for waiver clients, and to provide 
crisis intervention services, were woefully inadequate. To provide behavioral 
management support for waiver clients, the State has developed a multi-tiered 
approach. First, all waiver providers are given funds for "Consultants' Fees" 
in their annual grants. These funds may be used to purchase behavioral 
management services on an as-needed basis. However, these fees are also used 
to purchase other professional services for waiver clients, including physical, 
speech, and occupational therapies, and sometimes medical care that is not 
reimbursable under the regular Medicaid program. Providers indicated that 
these budgets were not sufficient for purchasing the level of services actually 
required by their clients. 

Second, the State has developed an Intensive Behavior Management Program 
(IBMP) which consists of special IBMP units in each of the four Maryland 
regions to provide consultant support services and short-term in-patient 
back-up to community-based providers. A different model is employed in each 
region. However, providers must purchase services from the IBMPs with the 
resources available through their grant. While providers were generally 
positive about the quality of services available, they also stated that the 
price of the services was expensive, and therefore not routinely available to 
all clients. 

Third, DDA had intended to use the Carter Center, an 8-bed facility 
attached to the University of Maryland at Baltimore, as a more long-term 
in-patient resource to provide intensive behavior management for specific 


clients. The Department had been forced to use the facility as a locked 
facility for criminally dangerous patients, and had never been able to make 
this resource available. However, resources have been approved by the 
legislature to free up these beds in FY 1989, and to make it an available 
resource to community-based providers within the next year. In fact, DDA 
sought and obtained legislative approval to substantially expand its behavioral 
management support services in FY 1989. 

Providers' opinions about the effectiveness of behavioral management 
support services were not uniform. The availability of resources varied from 
region to region. Although the resources which were available were viewed 
positively for the most part, the greater concern was about access and cost. 
Some also thought that the services were not appropriate to the need. 

"I don't need some Ph.D. to come out here and write up a [behavior 
management] plan that is way over the head of my staff. I need 
something simple, that works, and that my staff can implement." 

Other respondents felt that the reliance on an externally-structured 
behavioral management system was the wrong approach. 

"If you're going to do it right, you've got to do it yourself. People 
from the outside just don't know the client well enough. Plus, the 
services need to be rendered at the place where the problem is 
occurring. We had a client who was always running away, so we sent 
her to the IBMP. Their response was to put her into a locked ward!" 

Further, providers said it was very difficult to admit clients for 
in-patient services. 

"Everybody acts like it's our problem. Their attitude is to 'hang in 
there' and deal with it ourselves. They're afraid that we're trying 
to dump our clients back on them, when we're not. They're not 
assisting us with keeping people in the community; their attitude is 
to make you keep people in the community." 

In general, providers expressed a desire to simply make more resources 
available for developing behavioral management programs within the agency 
itself, rather than having to rely on accessing external resources. More 


emphasis should be placed on identifying potential behavior problems before 
they occur, and developing plans for preventing those behaviors from occurring 
in the first place. However, they also expressed a desire for more in-patient 
back-up when things get totally out of control. 

Some providers also have difficulty obtaining access to generic health care 
services for their waiver clients. This problem was perceived as a general 
problem of Medicaid beneficiaries, not specific to the waiver program. A 
number of providers had also experienced particular difficulties related to the 
characteristics of their clients. "The hospitals always think that we're 
trying to dump our clients on them, and try to discharge them as soon as 
possible." Many providers use walk-in clinics as their primary source of 
medical care, but many expressed a desire to develop more permanent 
relationships with physicians who would get to know their clients better, and 
who could provide more continuing care. As previously discussed, a few 
providers had negotiated special contracts with local providers, such as HMOs, 
to provide ongoing care to their waiver clients for services that were not 
reimbursable under Medicaid. 

How effective are the quality assurance mechanisms employed in the waiver 

As previously discussed, Maryland uses a multi-tiered quality assurance 
system in the Medicaid waiver. There are four major components in the system. 
First, all residential program providers must be licensed by DDA. Licensure 
and certification teams from DDA inspect residential care providers annually to 
monitor compliance with DDA regulations for DDA-funded clients and programs. 
Second, since waiver providers are also Medicaid-certlf ied providers, the 
Medical Assistance Compliance Administration of the State Medicaid agency 
conducts annual reviews of waiver clients to ensure compliance with Medicaid 
regulations on the waiver program. Third, DDA contracts with a private 
organization, the Delmarva Foundation, Inc., to conduct annual 
re-certifications of waiver clients to determine their continuing eligibility 
for waiver services. The Delmarva Foundation continued stay review also 

Under Federal regulations, developmentally disabled persons receiving 
waiver services must meet ICF-MR Level of Care criteria at admission to the 
waiver, and at annual re-certifications. If waiver clients no longer meet 
criteria for placement in an ICF-MR certified facility, then they are no 
longer eligible for waiver services. 


includes a quality assurance component. The reviewers evaluate whether clients 
receive updated assessments of needs in 13 service domains, whether the 
assessed needs are being met by qualified staff, and whether needs are being 
periodically re-evaluated. Fourth, Service Coordinators are responsible for 
developing and revising the client's Individual Service Plan (ISP), for 
coordinating and monitoring the services identified in the ISP, and for 
maximizing access to services in the community that are not covered under the 
waiver. Service Coordination is financed as a waiver service, and in the third 
year of the waiver (1986-87), $583,582 out of the total of $13,515,339 in 
waiver expenditures (4.3%) were for Service Coordination. 

In addition to these four basic components of the quality assurance system, 
most providers are subject to additional monitoring by their Regional DDA 
offices and by their county health and fire departments. Given this 
multi-tiered system of external monitoring of waiver clients and providers, the 
issue is whether the system is effective in ensuring that waiver clients are 
receiving quality services under the waiver. 

While respondents acknowledged the need for external monitoring of 
community-based providers, there was common agreement that the current quality 
assurance system was not doing a good job of promoting quality. A major 
criticism was that external monitors, well intentioned or not, simply did not 
know clients well enough to make professional judgements about the quality of 
care that clients were receiving. It was frequently recommended that the State 
pool the resources that are currently spent on a multi-tiered system, and 
invest it in a quality assurance system in which professional monitors could 
spend more time getting to know individual clients on a personal basis, and 
advocating for services on the client's behalf on the basis of that 
familiarity. Because quality assurance resources were spread across a wide 
range of activities, it was felt that no single activity was sufficiently 
funded to do the job correctly. DDA licensing teams were so overburdened with 
the demands of community expansion that they were considerably behind in 
conducting annual licensing reviews. Similarly, some believed the Service 
Coordination component of the waiver had never been sufficiently funded to hire 
the kind of professional staff who knew how the MR/DD system worked, so that 
they could effectively access services on clients' behalf. 


A second criticism of the quality assurance system was that it focused too 
much on the details, rather than on the overall quality of life of the client. 

"The people at DDA all came out of the institutions, and they manage 
community programs just like they were institutions. The regulations 
look at all the details, but they don't reflect the client's quality 
of life. Everyone's concerned with how many washcloths are in the 
bathroom, or that someone's bedroom isn't right off the kitchen, but 
no one asks when was the last time Jim had a date, or a vacation, or 
if he likes his job. Someone could ace all the regulations and still 
have a miserable life. Likewise, someone could have a great quality 
of life, but be totally out of compliance with the regs." 

A third criticism of the system was that the system was totally oriented 
towards identifying problems, but was not at all helpful in proposing 

"The last thing in the world we need is someone else coming in here to 

tell us our problems. We know our problems well enough. We'd like 

the State to be a little more supportive in helping us come up with 
some solutions, not just tell us what we're doing wrong." 

Even those involved in quality assurance activities agreed that the system 
had become somewhat negatively oriented. 

"There were obvious quality problems with community expansion, and the 
State's response has been to increase restrictiveness. They put many 
controls on the system in order to get quality. And the controls 
focused on pickier and pickier things. I think the whole system has 
lost something in the process. It has killed creativity. People are 
also losing their enthusiasm." 

A related criticism was the explosion of paperwork that accompanied the 
increase in monitoring and quality assurance activities under the waiver. 
Although providers recognized the need to document the services they were 
providing, there was concern that the emphasis on paperwork was detracting, 
rather than contributing, to quality of care. 

"The whole system has been designed around Medicaid, and Medicaid has 
just made it worse. When that's [paperwork] what you get checked on, 
then that's what you spend your time on. I think we've learned that 
more paperwork isn't accomplishing anything. Anybody who's up on 
their paperwork probably isn't working with clients properly. But 
it's hard to go back and say we don't need this much paperwork." 


Of all the components of the quality assurance system, Service Coordination 
was the most controversial. Providers thought the Service Coordinators' role 
had never been clearly defined. There was particular confusion over whether 
Service Coordinators were primarily client advocates or service facilitators. 
Providers indicated that the contribution of Service Coordinators varied widely 
from individual to individual. Some providers felt that their Service 
Coordinators had made a positive contribution to client care; others thought 
that the entire Service Coordination component was a total waste of resources 
that would be better invested elsewhere in the system. Service Coordinators 
themselves agreed that their role in the system had not been well defined, and 
that their role often had to be "individually negotiated with each provider." 

In comparison to Service Coordinators (case managers) in other Medicaid 
waiver programs for the developmentally disabled, Service Coordinators in 
Maryland have a more limited role. Case managers in other waiver programs 
often conduct initial assessments of clients to determine eligibility for the 
waiver program; have authority over the types and volume of services included 
in the Plan of Care (and thus the payment amount per waiver client); conduct 
annual re-certifications of client eligibility and revisions to the Plan of 
Care; and are the lead monitor of waiver program providers. A key difference 
in Maryland is that the client's Individual Service Plan (ISP) developed by the 
Service Coordinator has no administrative or financial link to the 
reimbursement amount for the waiver client negotiated by DDA, although the 
reimbursement amount is at least theoretically linked to the service needs of 
the client. 

What are the future prospects for the waiver program over the next few years? 

There was considerable uncertainty among respondents about the future 
direction of the Medicaid waiver program. The consensus was that the rapid 
community expansion that had occurred over the last four years had put 
"considerable stress on the system," and that the State needed to "shore up the 
service delivery system" before expanding further. "Shoring up the delivery 
system" was often in reference to the need to improve behavior management 
programs and crisis intervention programs for challenging clients before 


placing more clients into the community. It was also felt that the supply of 
day program services had not kept up with the expansion of residential 
programs, and that the next phase of community placements under the waiver 
should be preceded by placements into day programs. 

Many of the providers indicated that they were not planning to bid in the 
next round of RFPs for new waiver clients. Of those who were, most indicated 
that they would expand more conservatively this time around, perhaps developing 
one or two more ALUs at the most. They also intended to do a more thorough job 
of screening the clients they bid on, given their experience in the first 
rounds of waiver placements. "The clients still living at the SRCs are not 
going to be easy to serve. It's getting to the point where nobody wants to 
take any more clients." 

There was particular concern about the impact of further community 
placements on the supply of labor for direct care staff. Given the high number 
of vacancies in existing residential programs, providers were concerned about 
the impact of further increases in the demand for labor without some prospect 
for increasing salary levels for staff. A number of respondents indicated that 
their neighborhoods, particularly low-income neighborhoods, were getting 
saturated with community-based residential programs of all types — mental 
health, drug abuse, juvenile offenders, as well as programs for the mentally 
retarded. Some were concerned about political backlash from their communities 
due to over-saturation. 

Another concern of the more experienced providers was the lack of 
management experience in the system. "The whole system is being run by 
first-time managers." More training for management as well as staff was 
considered a critical element in the further development of the system. 

At the same time, respondents agreed that there would "always be providers 
willing to bid on new clients." The implication was that the providers who 
were more concerned about quality would be more conservative in expanding 
further, while those less concerned with quality would continue to pursue a 
strategy of high growth. Also, some respondents felt that given the low rate 
of inflationary increases granted by the State over the last few years, that 


some of the smaller providers would have to grow "just to keep their heads 
above water." 

Respondents also felt that there had to be a balance between further growth 
in the waiver program and growth in non-waiver residential program placements. 
It was felt that parents with severely disabled children graduating from 
special education programs deserved equal access to community residential 
placements for their children as clients served at the SRCs. Some providers 
felt that they could only get support from their Boards to expand their waiver 
programs if they also expanded their non-waiver residential programs as well. 
Thus, the future growth of the waiver is going to be inextricably linked to the 
development of non-waiver residential programs. In the FY 1989 budget, the 
Maryland legislature has approved 100 more residential placements for 
non-waiver clients (at an annualized cost of $2.6 million) in addition to the 
expansion of 160 new waiver placements (at an annualized cost of $7.2 million, 
half to be paid by the Federal government). 

The State is projecting substantial increases in the cost of serving waiver 
clients. Given the low demand for new clients by providers, and the higher 
service needs of clients awaiting placement, the State is projecting an average 
annual cost of $44,962 for the next 160 clients to be placed in the waiver. 
This cost will not be the same as the average Medicaid waiver cost per client 

because it includes room and board and other costs that cannot be claimed under 

the waiver. This average annual cost in what will be the fifth year of the 

Medicaid waiver is 28% higher than the average annual cost per recipient 

reported in the third year of the waiver. However, the average annual cost for 

all waiver recipients served in FY 1989 will be less than $44,962 since the 

costs of clients placed in FY 1989 will be averaged with those placed in 

earlier years, at a much lower cost. 

As the cost of serving waiver clients continues to increase, one question 
is whether the waiver program will continue to meet the test of 


If we assume that 10% of the annual cost for waiver clients is not 

recoverable under the waiver, then the average annual cost to Medicaid would 
total $40,466. Both figures also exclude SSI payments made to providers by 
waiver clients, which will average about $3,100 in FY 1989. 


cost-effectiveness. In other words, will it eventually be more expensive to 
serve waiver clients in the community than in the SRCs? However, one irony of 
the "cost-effectiveness" test in the Medicaid waiver program is that placement 
of institutional clients into the community has the additional effect of 
driving up average client costs in the institutions, as the fixed costs of 
operating the institutions get spread over fewer clients, as discussed in 
Chapter 2. For example, the annual average cost per residential care bed at 
the Rosewood Center (which is not quite the same as cost per recipient) has 
increased from $38,341 to $65,493 since FY 1985. 

Despite the many problems cited by respondents concerning the expansion of 
community programs and the implementation of the Medicaid waiver, most 
respondents were quite positive about the overall impacts of the Medicaid 
waiver program. While they acknowledged there was a long way to go in 
developing a community-based services system that provided quality services, 
many respondents gave the State credit for achieving their 

deinstitutionalization objectives. Many thought that problems in quality were 
inevitable, given the limited capacity of the community-based service system at 
the time the waiver was implemented, and the need to use the waiver to develop 
a broader community-based service system infrastructure. Many thought that the 
most important point was that waiver clients had gotten out of the 
institutions, and that no matter what, the quality of life for most of them had 
improved considerably in the community. Many commended the State for sticking 
with a program model of three clients per residence (despite its higher cost), 
since they felt that small program models were more normalizing than large 
program models. Finally, several respondents observed that it was unrealistic 
to expect for system infrastructure to precede community expansion, because 
"services always follow clients, not vice versa." 



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